The next stop at £15, after Rolls-Royce shares are up 10% so far in 2026?
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The market closes on Tuesday (20 January), Company Rolls-Royce Holdings (LSE: RR.) shares were already up 11% since the start of the new year. Is it just the momentum of last year continuing? Or are investors expecting something special from the February full-year results release?
Following the market can be a risky strategy. You are also a lucky investor who knows the right time when it comes to jumping on the bandwagon. But Rolls has rewarded shareholders who continue to hold, often under-promise and over-deliver with each set of results.
What can you expect?
If we continue with the November trading update, we should expect to see an operating profit of between £3.1bn and £3.2bn. And free cash flow of £3.0bn to £3.1bn. And that comes after a strong year across the board. In fact, the demand for civil aerospace has been strong. Main engine flight hours rose to 109% of pre-Covid 2019 levels.
It may need something more on top of that to push Rolls-Royce shares closer to £15. But that would still be an additional 17% increase from Tuesday’s close. And seeing the price increase by 110% in the last 12 months, even a temporary ups and downs may be enough to achieve that.
The broker’s latest update suggests a target price of around £13.50 to £14. That’s not far, especially considering these are temporary. And at the top of the range, we have a target of £16.25. It really looks like the market is expecting another high-flying year for the Rolls-Royce share price. Even if it doesn’t increase as much as it did last year.
A slow spell
There is one main thing that gives me pause, however. I see a gap forming here… between aerospace and defense, and the benefit of Rolls-Royce’s small modular reactors (SMRs) coming online.
Those reactors should fill a number of niches that need power well – including the growing demand for server AI. But we won’t see any significant revenue from the business until the 2030s.
Forecasters see earnings per share (EPS) in 2027 coming in at about 28% ahead of 2024 levels. But civil aviation brought back the pandemic, so recovery-led growth must slow, right?
As for the armed response to world conflicts… I really hope that the fear of driving will subside in the next few years. Overall, if you see the forecasts for 2028 and beyond, I think we can easily look at a stable but slow phase.
Odd one out?
So am I a controversial nay-sayer when it comes to Rolls-Royce as an investment? No, it’s not. I am very cautious when it comes to the growth of stocks that have many bags. And I personally would like to see more margin of safety than may be realistic.
For less risk averse investors than me? I think they should still consider Rolls-Royce shares today. And the £15 target doesn’t seem outlandish – but remember there’s a bearish analyst out there who fears falling below £8.
